Decentralisation Bonanza in the Iraqi Budget

By Reidar Visser (www.historiae.org)

27 January 2010

“Pork barrel” may perhaps come across as supremely insensitive in the Iraqi context and yet this very American expression may be the best way of explaining the political compromise that facilitated the passage of the 2010 budget in the Iraqi parliament yesterday.

The key to understanding at least some of the underlying dynamic here is hidden in article 43 of the new budget law, which specifies special rates of added income for a number of Iraqi governorates according to their economic structure. The historical roots of this article goes back all the way to December 2007, when the Basra branch of the Fadila party exploited local regionalist sentiment to make an unprecedented demand for a one-dollar fee per locally-produced barrel of oil to be set aside for the governorate in a special fund. Basra holds maybe 60 to 70% of Iraq’s oil (currently producing more than 1,000,000 bpd) and yet has one of the lowest standards of living in the country. Accordingly, many Basrawis think they are specially entitled to the disproportionate share of oil revenue that is constitutionally mandated for under-developed regions, and have earlier flirted with the idea of territorial autonomy for improving their lot. The idea of using federalism to solve the problem received a blow in a failed referendum initiative in January 2009, but the demand for a share of the oil lingered – to the point where their logic was accepted by the Maliki government, which eventually indicated its preparedness to give Basra 50 cent per barrel of oil. When news about this broke last May, it was immediately followed by demands from Kirkuk, Iraq’s second biggest producer (maybe 600,000 bpd) for a similar half-dollar per barrel fee. Fast forward to article 43 of the budget passed yesterday where this kind of logic has been pushed to its logical maximum: Henceforth, one dollar will be paid to the relevant governorates for 1) each barrel of produced oil; 2) each barrel refined oil (the biggest refineries are in Bayji in Salahaddin province and Dura near Baghdad) 3) each 150 cubic metres of produced natural gas. Also, 20 dollars will be paid for each foreign visitor to the “holy sites” in the governorates! In practice, the latter will mean Karbala, Najaf, Samarra and Kazimayn in Baghdad. It seems like an inverse version of the taxation strategies of absolutist rulers in seventeenth-century Europe, when attempts were made to put a levy on every conceivable household item from shoes to wigs for the purpose of increasing state revenue.